Coinbase Responds To SEC Lawsuit To The Court: SEC Abused Law Enforcement
- Coinbase argues that the cryptocurrencies on its platform are not securities and should be exempt from SEC jurisdiction.
- Transactions on Coinbase’s secondary market do not involve securities, and the issuers have no obligation to investors.
- The exchange claims the SEC lawsuit violates its due process rights and requests permission to file for judgment.
For the first time in court response, Coinbase reacted to the Securities and Exchange Commission (SEC) complaint, stating that the digital assets displayed on its platform are not investment contracts, so they are not securities and do not come within the jurisdiction of the SEC.
The SEC filed a lawsuit against Coinbase in early June, arguing that a dozen cryptocurrencies available via its wallet or trading platforms were unregistered securities. Coinbase stated in its rebuttal, submitted early Thursday, that these cryptos are not investment contracts and hence are not securities.
Coinbase also stated that the issuers of these tokens have no obligation to investors because there is no such obligation in transactions conducted on Coinbase’s secondary market exchanges, and the value that the exchange obtains through these transactions belongs to the purchase and Items that are traded, rather than the company that produced them, are thus not securities transactions.
The filing reads: “Even were the SEC correct that the assets and services it identifies are within the scope of its existing regulatory authority, this action must be dismissed on the independent grounds that it violates Coinbase’s due process rights and constitutes an extraordinary abuse of process.” The rest of the document contains a point-by-point answer to the SEC’s lawsuit.
Coinbase has already pushed this case in public remarks like tweets and blog posts, but Thursday’s filing goes into further length detailing the company’s position: The business maintained that cryptos on the exchange’s secondary market platform are not part of any arrangements in which a promoter is selling an asset related to a contract, citing the Supreme Court’s Howey decision as an example.
The exchange alleged in a separate filing to the court in charge of the matter that the SEC’s action violated its due process rights and that the SEC’s lawsuit may have breached the “major questions” concept. The corporation requested that the court allow it to file for judgment and set a deadline of seven weeks for its motion, the SEC’s dissent, and its own answer to the disagreement.
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